Bombardier Aero ponders next move

Farnborough Air Show » 2006
November 14, 2006, 12:22 PM

Canada’s Bombardier Aerospace (Hall 3 Stand D8) enters this Farnborough show with some critical questions to answer about the future of its regional airliner business. Operating under a cloud of speculation and conjecture since it announced its decision to shelve the once-heralded C Series project in January, the company continues to contemplate its next course of action. Unfortunately for Bombardier, a still ailing and volatile airline industry must ultimately dictate the direction it finally turns.

Ever since the market for new 50-seat regional jets collapsed, Bombardier has groped for an idea that might one day prove half as fruitful as the stroke of brilliance that turned the Challenger business jet into what would become the Canadair Regional Jet. So far the financial community has taken a dim view of its efforts, as the company’s debt ratings wallowed well below par. Not coincidentally, the major airlines too have shown tepid enthusiasm for Bombardier’s second attempt at creating a new airplane targeted at the 100- to 130-seat capacity range, prompting it to redirect funding and human resources toward other pursuits.

Now, as Bombardier faces a year in which it projects it will deliver only 80 regional jets, attention has returned to the tried and tested CRJ line. That platform has certainly served the company well for close to 15 years, but its further development appeared limited by a fuselage cross section originally designed to carry only a few well-heeled executives at a time. In fact, the early sales performance of the 86-seat CRJ900–from its launch in 2001 through the end of last year it had drawn firm orders for just 59 copies–led to questions about the wisdom of stretching the Challenger’s tube for a third time.

Nevertheless, by the time it seemed clear the C Series hadn’t impressed anyone enough to warrant the $10 million a month research and development drain it created, Bombardier began to consider stretching the CRJ airframe yet again, by another three rows, giving the so-called CRJ900X a single-class, 31-inch-pitch seating capacity of 98. The revelation certainly raised eyebrows, but according to Bombardier vice president for marketing and sales Trung Ngo, the skeptics miss the point.

“First of all, we believe the 900’s time is coming in terms of its acceptance by many airlines and in many markets,” said Trung, who pointed to the now solid-selling Q400 turboprop as another model that perhaps reached the market before its time.     “It is gaining momentum both from the standpoint of the airlines being able to deploy them–as you know, for pilot scope reasons and everything else–but more importantly coming to understand some of the potential for its deployment in their markets as well.” In fact, the CRJ900 has enjoyed something of a sales renaissance lately, attracting firm orders for 44 units in the first five months of this year alone.

If, as Trung insists, regional airlines have come to recognize the virtues of a classically defined regional jet that carries between 85 and 100 passengers, they may get one in the absence of the C Series. European pilot union scope clauses generally allow regional airlines to fly airplanes as large as 100 seats; perhaps the CRJ900X can satisfy a need that only a select subset of the world’s airlines recognize exists.

“There’s certainly interest or we wouldn’t be giving it this level of effort,” Trung told Aviation International News. “We’re pacing ourselves with the evolution of scope. Right now we’re targeting those who aren’t scope limited, and also low-fare carriers. The 900 today has got seat-mile costs that are coming awfully close to those of a low-fare carrier [flying] 135- to 150-seat airplanes.”

According to Trung, existing CRJ900 operators’ seat-mile costs run from nine to 9.8 cents. The company has set a target of less than nine cents per mile for the 900X, assuming a typical regional airline’s cost structure and $1.80 per gallon jet fuel. “Once you hit the eight-and-a-half mark, boy you are going to be an attractive piece of machinery,” said Trung. “But the compelling argument here is that a regional carrier per se is a low-cost carrier. So if you combine their already very low cost structure with an airplane that’s got extremely good economics, it’s amazing what they will do with it. I think it’s limited only by their imagination.”

Bombardier has already captured the imagination of propeller aficionados and a growing number of airline CEOs with the 78-seat Q400 turboprop, an airplane that beats any regional jet when it comes to seat-mile costs, regardless of sector length. In fact, on a 200-nm segment, for roughly the same trip cost incurred by a 50-seat jet, an airline can get at least another 20 seats of capacity with a turboprop, be it the Bombardier model or the ATR 72. Use trends clearly reflect the disparity, rendered even more pronounced by rising fuel costs: according to Bombardier’s figures, 67 percent of Q400 departures either supplement or have replaced jet service.

With an apparent turboprop resurgence showing little sign of abating, Bombardier has begun exploring untapped demand in capacity ranges previously considered the exclusive domain of jets. Three more rows of seats would raise capacity to 90 passengers, likely the most the Q Series platform could carry with its current engines and basic airframe. Anything beyond 90 seats would involve the unviable option of a completely new design. However, if the chatter at late May’s Regional Airline Association meeting offers a clue, demand for a stretched Q400 could prove even more immediate than that for another CRJ.

“To get an extra five or ten seats in there would be huge,” remarked the CEO of Hawaii-based Islandair, Rob Mauracher. Now, if Bombardier can convince the powers that be at Alaska Air Group, parent company of North America’s other Q400 operator, Horizon Air, or Jim French of Flybe–Europe’s largest Q400 operator–the Q400X might see the light of day. For the Canadian airframer, that would be huge.

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